Best Ways to Use Your Covid-19 Stimulus Money

COVID19 Stimulus Check

Covid-19 Stimulus Check Investment Opportunities

Thanks to the Coronavirus Aide, Relief, and Economic Security (CARES) Act millions of Americans will be receiving stimulus checks throughout April. A single taxpayer will receive $1,200, a married couple filing jointly will receive $2,400, and each qualifying dependent will add $500 to the check. Quick math will show a married couple with two children stands to receive $3,400. Generally speaking, the money should be earmarked for essential items and household necessities. However, if recipients happen to be in a place of occupational and financial security, like active duty service members, the stimulus money offers a little pocket change to play around with. So, what are the options?

Invest in a Mutual Fund

Mutual funds are relatively safe investment vehicles that could boost your retirement income, or help you meet other financial goals. There are thousands of funds to choose from, but index funds are a specific type of mutual fund that are popular at the moment. Index funds are designed to perform as your chosen market does over time, and since stock markets traditionally grow in value there is less risk investing in the entire index. For example, the S&P 500 started the 2010 decade at price of nearly $1,133 and ended in 2019 a price of about $3,230. A solid return if you held on for the whole decade. On the other hand, a traditional mutual fund is actively managed to try and beat the market and may return bigger earnings if your manager has a keen eye, but could lose more if their predictions are off.

Check out your bank’s website for investment opportunities, or look into one of the many brokerage firms including Charles Schwab, Vanguard, or Fidelity. Be sure to read the Fact Sheet for any fund you are interested in to help you understand the fees, risk assessment, and performance history before signing up.

Finalize your Home Renovation Project

Whether you are looking to sell your house or simply enjoy your home a bit more, it might be a good idea to upgrade some features. The CARES stimulus money probably won’t be enough for a new kitchen, but it might net you the backsplash that was originally overbudget. Here is a list of less expensive ideas and the national average cost of labor and materials according to Home Advisor:

  • Install a New Front Door: $1,000
  • Upgrade Light Fixtures: $475/per fixture
  • Add Kitchen Backsplash: $600-1300
  • Install Crown Molding: $1,100
  • Interior Painting: $200-$800/per room
  • Replace Carpet: $1,600
  • Lawn Care: $100 – $300 per month

Of course, with a little elbow grease you could save some money the Do-It-Yourself way.

Contribute to Your IRA or Retirement Accounts

Individual Retirement Accounts (IRAs) are a great way to save for your later years. The maximum someone under 50 years old can contribute is $6,000 per year, so the CARES money would be a nice way to top off those yearly contributions. Remember, compounding interest is your friend! The more you save earlier, the more you earn later.

Invest in Your Child’s Future

The average cost of tuition, room and board, and fees at a public four-year institution for the 2019-2020 academic year ran nearly $22,000 while cost of a private school cost more than double at nearly $50,000. You can bet by the time your adorable toddler is ready to go off to college the cost will run you at least the same amount, likely several thousand dollars more.

Enter 529 plans, or Qualified Tuition Plans. These are tax-deferred state-run investment accounts similar to mutual funds whose withdrawals are not taxable if used for qualified tuition expenses. Traditionally, 529s were used for college tuition, but can now be used to supplement costs of K-12 education. Even if your child winds up enlisting in the military, or otherwise not attending university, that money was saved, earning interest, and helping make your family financially secure.

Pay off Credit Card Debt

According to Nerdwallet, the average account balance for someone who carries debt over month to month is nearly $7,000 which costs them over $1,000 a year in interest fees. That’s a lot of money going to someone else considering $1,000 invested each year over 10 years at 5% interest will net you over $4,000 in interest.

Regardless of how you spend your CARES stimulus money it is most important that your household necessities are taken care of. Feed and shelter your family, then have a little fun with Uncle Sam’s allowance.

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